Digital transformation can provide outstanding opportunities for organizations to innovate. But many of these initiatives fail, even when backed with unlimited resources.

With millions invested in failed initiatives, many companies are scrutinizing the investment and resources they deploy on digital. Many business leaders (including CDOs, CIOs and CMOs) are thus loath to pursue digital innovation, given that they cannot develop innovative products with the constrained resources at their disposal.

The history of innovation in resource-constrained countries around the world shows that limited resources do not restrict innovation. Frugal innovation in underdeveloped countries has sparked major products, such as the ChotuKool refrigerator launched in India a few years ago for only about $50 (instead of the typical $500). Many mothers in the Mumbai slums, who had never had refrigeration, have bought this battery-operated refrigerator, and it has significantly changed their lives.

As the success of ChotuKool indicates, resource constraints can provide a thriving platform for innovation. In fact, the concept of frugal innovation can be applied to the launch of any company’s next digital innovation for only a few hundred thousand dollars—compared to millions often spent in developed countries on digital innovation.

Digital Innovations

Three recent innovations at Prysmian Group, the world’s largest manufacturer of energy and telecommunications cables, exhibits the kind of frugal digital innovation that can take place with constrained resources. Using a two-person internal team in collaboration with the university, Politecnico di Milano, the Innovation Lab within the IT Department of this Milan-based company developed each of these innovations for less than 100,000 Euros, saving millions on each one.

Among the first ideas created by the Prysmian Group’s new Innovation Lab was a drone-based monitoring system for inventory tracking in the company’s warehouses. Every facility stores hundreds of cable products, each weighing thousands of pounds. The new system would replace the traditional, risky, labor-intensive manual activity with digitally controlled drones that look for, scan, and photograph the barcode on the specific inventory items in the warehouses.

The one-warehouse pilot program successfully illustrated how a frugal digital innovation can transform a traditional process. However, the program encountered a major physical constraint—the drones’ batteries lasted only twenty minutes—making the program impractical and leading to temporary hold on the project.

The Innovation Lab next developed and patented the Drum Tracker, a small low-cost cylinder that can be placed on a drum to provide information that will help the company track the millions of expensive drums sold to customers around the world.

For example, each day the tracker would send to the cloud data on the drum’s location and condition, the physical treatment undergone by the drum and its cable in the past few days—and the speed at which it has moved over the ground and has rotated, providing an indirect (about 90 percent accurate) measurement of how much cable has been used and how much remains on the drum.

The lab produced the Drum Tracker, a first for the industry, using existing technologies, including a GPS sensor, transmission card, accelerometer, and battery, for about one-tenth the cost of a traditionally funded digital project. Its pilot program, with 400 drums, demonstrated cost savings and received praise from the company’s leadership, setting the stage for a full-scale implementation.

Today, the Innovation Lab is exploring how hologram technology might be used to present a 3D projected catalog of the company’s many different cables. If successful, this innovation would enable the company to virtually project a 3D hologram of every cable a customer might want to see, eliminating the need to physically handle and display cable samples.

No one knows yet if this idea will succeed. But the lab believes it is a frugal digital innovation worth exploring because it has the potential to transform a traditional activity into one that can be done less expensively, and better, digitally.

Successful Frugal Digital Innovation Components

Prysmian Group’s approach to innovations holds four lessons for companies driving digital innovation when resources are severely constrained.

Relentless focus on the customer - The frugal organization will want to clearly define the customer’s journey and understand their decision-making process and pain points. This focus on the customer is key to recognizing the trigger that will make the customer spend money on the new product. Likewise, it eliminates the approach of many innovations backed with huge resources: attempting to wow the customer with a technically sophisticated product having bells and whistles beyond the needs and budgets of those in the targeted market. ChotuKool is a simple product, but it serves the specific need of the poor mothers in the Mumbai slums—keeping their milk cool and fresh.

Change of mindset - Digital leaders will want to discard the traditional nonproductive mindset that sees resource constraints as a liability limiting innovation. They will replace this nonproductive attitude with the mindset that resource constraints are an opportunity to innovate because they ask the team to be more agile and efficient in what it does.

Innovative partners - Traditional large systems integrators often have fees running into the millions of dollars and timeframes into years. Companies with resource constraints will want to consider other partners to help develop their digital innovation in a frugal and timely manner. The best partners are startups incubated within universities. Many major universities have innovation labs, often with startups run by students. Most of these universities and students are eager to work with companies on frugal digital programs that can lead to new and transformative innovations.

Inspiring leader - It is critical that the person leading the frugal digital innovation be an inspiring leader. This is someone who believes in their team and what it can accomplish even with constrained resources. It is someone who internally markets the success the team achieves through frugal digital innovation so everyone throughout the company knows what the innovative solution does and will support it and will give recognition to those who made it successful.

Although it may not seem intuitive, resource constraints can spark frugal digital innovation. Business leaders who see such constraints as the end of digital innovation need only look at the creative solutions launched with little funding in underdeveloped countries and at the digital innovations launching at companies like Prysmian Group. As these programs show, rather than stifle innovation, resource constraints can be a platform for frugal digital innovation for any company ready to think beyond the past, willing to find partners outside traditional vendors, and eager to be agile and creative.

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